Political, Legal and Social Factors Impact on Businesses

Unit 1

Assignment 4 P6

Political, legal and social factors impact on businesses

The two businesses I will compare will be Tesco and Easy Jet.

Political

There are many political factors that can affect a business on any scale of size. The first will be political stability during eras of political stability business will be favoured this is because when a political is elected to office they will usually hold their position for 5 years. Once parties are elected they will seek to put their manifesto of plans into action these plans are published publicly so business can understand what the plans of the government, businesses will then look at the plans and identify how the changes will affect their business. This then gives businesses a sense of confidence for the years to come because they know exactly what the changes are and know how this will affect their business an example would be 2009 the labour government increased environmental taxes on larger vehicles like 4x4's this in turn affected the car industry and therefore started producing a increased number of fuel efficient small cars such as electrical and hybrid cars. The political environment of a country is influenced by the political organisations such as philosophy of political parties, ideology of government or party in power, nature and extent of bureaucracy influence of primary groups etc. political stability in the country, foreign policy, Defence and military policy, image of the country and its leaders in and outside the country. The political environment of the country influences the business to a great extent. For instance, the Government of India, bottling and sale of cocoa-cola was discontinued in India in the late seventies following policy of restricting the growth of multinationals in Indian markets. But, its entry was allowed under the New Industrial policy of 1991. Under this new policy, government allowed liberalized licensing, imports and exports, inflow of foreign capital and technology on more liberal terms. The trends towards globalization and signing of GATT in 1993 have posed new challenges before Indian business. Another political factor affecting businesses are taxation levels during tax rises businesses will have to pay higher amount of tax therefore taking a cut out of profits however the government gain revenue this is vice versa when taxes decrease. Another political factor affecting businesses will be direct support from the government; the government are prepared to give grants and low interest loans to businesses however this is only on specific terms for example sometimes governments may give grants to employers taking on young employees.

Affects on easy jet

There are many political factors that affect Easy jet. An example would be the level of inflation is a political factor this is because the government decides if they would like to attempt to increase and decrease inflation. Inflation will affect Easy Jet because an increase in inflation would mean that the value of money will also decrease however inflation only increases when the economy is in growth. Therefore if inflation increases this would mean that the economy is going through a growth period and in general people have a high disposable income therefore they will spend more and have a higher demand for their products and services. On the contrary when there is a recession inflation decreases this is to encourage more spending as the value of currency increases however in the recession people are struggling for money, jobs etc. This means that Easy Jet will benefit from a growth in the economy rather than if there would be a recession.

Also another type of government political factor affecting Tesco would be the stability of the current political position the reason for this is because as stable political leaders businesses like easy jet can forecast and predict proceedings because the political environment is stable however if the political environment was not stable as it was in Germany in 1997 when there was a split vote and no party was elected to office which caused a very unstable political environment for the businesses as this prevented them from them from forecasting and predicting.

Level of taxation will also affect Easy Jet this is because if taxes rise consumers will have less disposable income however if taxes decrease consumers will have a higher disposable income enabling easy jet to increase sales. Direct support will also affect easy jets business activities this is because the governments may offer a scheme that entices easy jet to hiring undergraduates by offering a grant. This may persuade easy jet to alter business activities and accept the governments offer.

Affects on Tesco

With an organisation as big as Tesco's there will be many topics that may affect them. For instance political. This could include government support, provide, enhancing skills of the working population of Tesco's which may include training days or induction days if you have just been previously employed. The main factor could be government support which has to routes that it can go down. Direct support or indirect support which also includes the fiscal policy which is linked with taxes, vat and co-operation tax. Loans may be offered to Tesco if they are struggling with been able to spend money on buying new products and better products. For example, during the recession Tesco might not be doing as well as they need to be and they might not be able to spend much money on new things which would increase the amount of money they make. They may then take a loan out from the government so that they can afford what they need to buy. However, they do need to pay this back as well as the interest rate. So for example if Tesco had taken a loan from the government which was £1000 and the interest rate was 5% Tesco would have to pay the government back with £1150. However Tesco don't normally take loans out because they are never short of money as they are such a big global organisation.

Grants are another big thing that is linked with direct support. Grants are basically funds that are by one party often by a trust or government department. To receive a grant there is normally a written application to go through first to see if the company wanting the grant is eligible to receive one. Tesco have a charity called "Tesco charity trust". It was set up on the 1st June 1987 to support both national and local community charities. It is run by a board of trustees recommended by the main board of Tesco PLC. In February 2009 the Tesco Charity Trust made cash grants of £1,899,137 to local, national and international charities.